Problem: Can Not Make Blur Affect Emission
Firstly, your blur is set way too high - 100% will blur everything over the entire image. This results in the mask becomming a uniform grey that has little noticable effect when added to the image. Try toning the blur down to, say, 5% or less for a more subtle effect.

I've set up a scene similar to your example - with two materials (each with pass index of 1), one yellow, the other white. I've added some monkeys around the border to illustrate the lack of blurring for other materials.



I presume the effect you are going for is something like the following :



Here are the compositor nodes I used to achieve this :



The main difference is to use the mask as the input to a Mix node (rather than Add) to mix between the blurred version and the original image. In this way, anything that is Material Index 1 is blurred but everything else is left untouched. I'm sure there are other ways to achieve this but this was the closest I could come up with to your original setup.

Obviously you can adjust the Blur node to affect the amount of blurring - either by changing the percentage or by reducing the 'Size'.



EDIT

Another way of achieving a similar effect is to use the Defocus node and drive this directly from the ID Mask :



My original post used a Blur node in a similar way but it seems that the Blur cannot be dynamically controlled in this way - but the Defocus node can.

Also, I notice that your emission materials are outputting values much higher than 1. This could be causing oversaturation, masking any blur. Try reducing your emission to 1 and see if that helps. If it does then you may need to use a Light Path node to limit the emission for camera rays - or include nodes in the compositor to limit the light before passing into the blur/defocus.